The Federal Reserve cut its benchmark interest rate by 0.25 percentage points Wednesday, bringing the federal funds rate to its lowest level in more than three years. CBS News' Kelly O'Grady and Olivia Rinaldi have more.

Washington

The Federal Reserve announced a 0.25 percentage point interest rate cut, its third consecutive reduction, in an effort to support the labor market amid ongoing concerns over inflation and incomplete economic data due to a recent government shutdown. The cut is expected to make borrowing slightly cheaper for consumers and small businesses, though the impact on long-term loans such as mortgages may be limited.

As Chair Jerome Powell's term nears its end, President Trump is actively interviewing candidates for the position, including former Fed governor Kevin Warsh. The administration continues to address economic concerns, with affordability remaining a key issue for many Americans as the president prepares for upcoming midterm elections.

Federal Reserve cuts interest rates by 0.25 percentage points

Any moment now, the Federal Reserve will announce its final interest rate decision of the year. The central bank is expected to cut rates for the third straight time, but today's decision comes without some key hiring and inflation data, which of course has been delayed due to the government shutdown that ended last month. And I just got word that it looks like the Fed has announced a one-quarter percentage point cut. This is one of really the last policy meetings that Fed Chair Jerome Powell presides over before his term ends in May. He'll of course speak this hour on where things stand and how next year is shaping up. But with this breaking news, let's go to CBS News Money Watch correspondent Kelly O'Grady who is at the New York Stock Exchange. So Kelly, in line with expectations, a quarter point cut, what does this cut mean for consumers? What kind of impact will it have? So essentially this makes borrowing money just a little bit cheaper. A quarter of a percentage point is not that much, I will admit, but something is better than nothing. When you think about the things that are impacted by interest rates, if you're a consumer, you might see your credit card interest rate go down a little bit. Again, it's not going to be that helpful if you're looking at an interest rate over 20%. But this may also flow through to things like your 30-year fixed mortgage, your auto loan rates. Those are more long-term, so it's not a one-for-one. But where I do think that this will create some relief is there are a lot of small businesses that are looking to make investments, capital investments, as they think about what they want to do with their business in the year. And when you have a quarter of a percentage point, if you are making a very sizable loan, that's where you actually can feel meaningful relief. How do you read the three-in-a-row cuts, what that bodes for the economy? And also, what can you tell us about what 2026 can bring when we know the president is very eager to replace the head of the Fed? So three in a row, what that tells you is that the Federal Reserve, when they're looking at their two mandates, keep inflation in check and keep the labor market at full employment, they decided to prioritize the labor market. Because when you cut interest rates, you make borrowing money cheaper. People go out and spend. Businesses decide to hire more because they have a little bit more wiggle room. That being said, they also have this rising inflation problem. It's not out of control, but it is getting further away from that 2% target. And so we are going to be going through the numbers here, and I know we'll talk to you a little bit later, but I think the big question is going to be that 2026 number. How many interest rate cuts are we going to get, if any? Because you do have these two dueling issues. But the three cuts in a row very much said Fed was going, OK, labor market, we need to fix that. OK. Kelvia Brady, thank you. CBS News White House reporter Olivia Rinaldi joins us now from our Washington bureau. Olivia, the Federal Reserve's decision to lower interest rates today comes as President Trump prepares to install a replacement for Chairman Powell. How is that search going? Well, we're told it's ongoing today. The president is interviewing replacements for Federal Reserve Chairman Jerome Powell. One of those people is Kevin Warsh, who formerly, or used to serve, excuse me, on the board of governors from 2006 to 2011. So that's someone who potentially could be a top pick for the president. We also know he had considered him for treasury secretary this time last year, after the president had won and was trying to pick his cabinet. Someone who won't be picked for this role is Scott Besson. He is the current treasury secretary, who the president said he actually offered the job to and thought about picking him. But Scott Besson said, no, thank you, I'd like to stay at the treasury. So we know the president is reviewing those potential candidates today, hoping potentially to make an announcement soon. As we know, Powell's term is coming to an end. And President Trump has called the affordability issue a fake narrative made up by Democrats to try and sway the public. But at the same time, he says he inherited affordability problems from the previous administration. So did he do anything to reconcile those two ideas at the rally in Pennsylvania yesterday? Did he stay on message? Well, this was supposed to be a messaging event that really turned into a campaign rally. He talked about everything from the strikes off of Venezuela to curbing immigration from people from Somalia. The president did talk about affordability a little bit. He said your 401ks are going up and gas prices are going down, but did say that a lot of the affordability issues he inherited from the Biden economy. But at this point, we're about 12 months in to this administration, and the president said he would own this economy on day one, and yet Americans are still feeling that squeeze. We heard people yesterday telling our Nancy Cordes, who was at that rally, that they don't give the president that A++ rating that he gives the economy. They give it a B, a C, sometimes a D or an F. They're really struggling with grocery prices. But the president's still saying that prices are going down, that his economy is great, and we are expecting him to do more of these types of messaging events, more of these types of rallies, especially as the midterms come next year, and this is a point of vulnerability for this administration. And the president to Politico's Dasha Burns in that wide-ranging interview said don't be dramatic when she brought up affordability and people planning their budgets for the next year. This event wasn't a one and done. Where and when else can we expect to see the president making this pitch in the coming year? Well, they have not announced any new places that they'll be going, but Susie Wiles, the president's chief of staff, said they do expect to do 2024-style campaigning in the next year ahead of the midterm, so we'll have to see. Of course, there's a number of Senate races in Georgia, in Texas, that are going to be very crucial for this administration to win if they want to keep implementing their agenda on Capitol Hill. So we'll expect to see some of those battlegrounds, but, Lindsey, we'll be watching. Olivia Rinaldi, appreciate you.

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